If you were to ask a bunch of startup-folk to list the qualities strong founders have in common, I’m sure most would agree that agility and persistence are up there – startups need to adapt quickly, and founders need to have the grit to push through tough obstacles. At this point, everyone knows that. But here’s where it gets interesting – at particular times in a startup’s life, especially when things aren’t going well, persistence and agility are actually opposing forces. Do you keep pushing forward with your current strategy hoping your circumstance improves, or do you quickly adjust your strategy to something you believe would work better?

Since May, Ephemeral has been in the market raising its seed round. We set out with the goal of raising enough capital to get through clinical studies and launch our first shop in NYC. This is the second round we’ve raised, and even though the first was rough (we’re a non-software tattoo company in NYC!) we thought this would be different: we just graduated Techstars, achieved a major R&D milestone, and had $500k soft circled within a few weeks of opening the round. We were f*&#king crushing it.

But then, the numbers came in. Even though we knew we had to move quickly and make a decision, we were stuck.

We decided to set a deadline. If on June 1st we had less than 5 strong potential leads in the pipeline, we would pivot. No exceptions. And so we did. We didn’t hit our benchmark and decided to downsize our round. It’s too early to determine if it worked (we’re still raising), but so far the sentiment has been positive. The market is more excited by the increased scarcity, and we have a bit more leverage in negotiations.

So what did we learn from this, and what can you take away? Yes, it’s important to move quickly and fight through tough times, but it’s even more important to understand that balancing these qualities is crucial. It would have been easy to keep grinding away with our current goal, but what if we blew through all qualified investors and came out dry? Then what? We had to set a hard deadline for ourselves with quantifiable fundraising metrics. We packed our time before the deadline with as many meetings and intros as possible, but when we didn’t hit our target we knew we had to adjust, despite how painful it was. Check out post number two (coming next month) to see how this actually panned out!

Omni’s most recent problem has turned into a larger opportunity for the company. Our initial target market had been Mexican Americans in New York City who send money to their families in Mexico. When conducting primary market research to confirm our assumptions and test our alpha product, we struggled to gain the attention and trust of Mexican and hispanic communities due to a language barrier and lack of connections within those communities. Additionally, we realized that Anti Money Laundering compliance when remitting to Mexico is especially difficult and expensive. In response to these recent discoveries, we decided to strategically shift markets and focus on Indian Americans and Indian immigrants in the UAE who send money to their families back home (India). As a result, we could better gain the trust of potential customers because Indian Americans were more comfortable with using their mobile phones to remit money as most of them are middle- to upper-class with a bachelor's or master's degree. Additionally, the size of the market increased by making this strategic transition as India is the largest remittance recipient with over 60 billion dollars in annual transactions, dwarfing that of Mexico.

In addition to the findings above, we recognized that while our fee-based revenue model was functional, it was highly inefficient. By offering premium services to our vendors, we were able to double our projected revenue model. Our first premium service was inspired by our meeting with Irv during our first immersion trip to Silicon Valley. After our conversation we constructed, and later confirmed, our hypothesis that the greatest barrier to point of sales accessibility for small sales businesses is the cost of digital payments, not the POS service fee itself. As Omni is able to offer free digital payments, we can provide POS services for just a monthly subscription cost, without card processing fees. As a result, Omni can open up the POS market to the millions of vendors who previously couldn't afford it. Simultaneously, this would expand Omni’s vendor network as it would serve as an added incentive for vendors to join the ecosystem. Using these POS metrics, Omni can further monetize by offering vendors additional features such as preferential user routing. (i.e. if Omni recognizes via POS metrics that a store lacks foot traffic during certain hours, Omni could offer preferential user routing to that location during low traffic hours for an hourly fee).

Another added benefit from switching our target demographic to Indian immigrants is a reduction in legal fees. Because the largest percentage of Indian Americans reside in New Jersey, Omni will be applying for a domestic monetary transfer license in New Jersey instead of one in New York. The New York domestic license costs around $200k in legal fees and requires a minimum of $250k in liquid assets and bonds. In comparison, New Jersey costs around $5k in legal fees and requires $100k in liquid assets and only $50k in bonds. Additionally, the timeline required to obtain a New York monetary license is around 2-5 years while New Jersey is just 6 months. As a result, Omni will be able to launch its product quicker and spend less capital on legal fees.

TABu provides a product that many people resonate with. TABu is an app that allows you to open, split, and pay a bar tab from your phone. The days of forgotten credit cards and waits to close a tab are over. There has yet to be an instance where I told a friend or stranger about TABu and they haven’t smiled or told me a bar story. Too many smiles and stories can become dangerous. They make you think you’ve already won.

In about 8 months, we built a polished version of TABu, integrated with leading point of sale systems, and launched some great pilots in NYC. We got very lucky with a lot of things, like getting selected for Apple’s new show, Planet of the Apps. At age 19, not even halfway through college, things were pretty great!

Four months after starting the pilots and launching on the app store, we were stuck. We had learned a ton, perfected the product, but the pilot venues were pretty underwhelmed. Because TABu integrates with a venue’s POS system, we have to sell to venues. Very few people were using the product. It wasn’t surprising, given 4 venues in NYC represents .2% of NYC bars. TABu looked great on paper (and on the app store), but the sales cycle was horrific and the adoption incredibly slow.

It was time to step back and do something I absolutely hate doing - pause execution. After speaking with 22 venues in 8 days, it was clear that we were going in circles, pitching venues and failing. Something was not right. To our team, our value proposition was crystal clear. TABu eliminates the time bartenders waste handling payment per customer, 3.5 minutes on average, so they can serve more customers per hour, decrease lines, and increase the rate of revenue generation. Right?

Wrong.

That value proposition only emerges at scale. Signing up for TABu and getting set up does not improve your efficiency at all. It does not save you time or money. What does is people actually using it. We had the value proposition completely wrong for our early adopter venues.

After speaking with dozens of venues, we learned first hand what they really want and respond well to. We have shifted our focus to developing specific features that leverage our current assets (POS integration and wireless payments) to fulfill value propositions that don’t require a mass amount of users. We have several exciting projects in the pipeline we look forward to sharing as soon as we begin testing them with our existing pilot merchants. As we develop these features, we are continuing to sell to venues and launch strategic distribution partnerships.

For TABu, it was so clear that people wanted our app. It took far too long and far too much luck to realize that the same could not be said about the other side of our market - the venues. The lesson learned is to put every customer first, especially in a two-sided market, and recognize the difference between an early- and late-stage value proposition.

Over the next few weeks we look forward to launching features that can provide immediate value to early adopters to use as leverage to continue growing from venue to venue, in NYC and beyond.

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This program is presented by NYU Stern's Office of Student Engagement and the W. R. Berkley Innovation Labs, established with a gift from technology executive and alumnus David Ko (BS ’93) and his wife Jennifer.